HOME improvement stores just got something else besides gift cards to promote this holiday season: the new sales tax deduction.

The IRS released guidelines Friday for how taxpayers can determine if they will benefit from a new law that allows state and local sales taxes to be deducted from federal tax returns for 2004 and 2005 instead of state and local income taxes.

In Texas and seven other states, residents don't have to choose which tax break helps more because they pay only sales tax.

But they do have to itemize to use the sales tax deduction.

Last tax season, only a fifth of all Texas taxpayers itemized, meaning they listed and subtracted certain expenses from their taxable income.

Taxpayers who fill out the 1040EZ and other forms don't itemize and, therefore, cannot claim the deduction.

But the sales tax deduction may tip more people who are close to having enough qualified expenses to exceed the standard deduction — $9,700 for married couples filing joint tax returns, $7,150 for heads of household and $4,850 for single taxpayers — into itemizing territory.

The state comptroller expects the sales tax deduction will push the percentage of itemizing Texans to 26 percent.

If that increase happens, it is likely to come from the middle tax brackets.

Among Texans with household incomes under $30,000 — about half of the state's tax filers — only about 5 percent itemize.

Deduction tables

Taxpayers can calculate the deduction based on what they actually spent on sales tax if they have saved all or most of their receipts.

But they need not keep gasoline receipts, because the gas tax is an excise tax, not a sales tax.

Or taxpayers can estimate the tax using the state-specific tables the IRS released Friday. Those tables set deductions for individuals in each state based on income and number of people claimed on the return.

Taxpayers who bought or will buy big-ticket items this year, such as cars, trucks, motorcycles and boats, can combine the standard deduction estimate with the actual amount of sales tax paid on those items.

In Texas, only state sales tax, which is 6.25 percent, is collected on boats, motor vehicles and mobile homes.

Flurry of spending

Fred Lester of the Red Wing Boat Co. says most people shopping for boats at his store in the East End aren't even aware of the new rules that allow sales tax to be deducted.

"We bring it up to the customer," he said.

"They don't necessarily know it."

The IRS also said Friday that taxpayers who bought or will buy airplanes and other aircraft; traditional, mobile and manufactured homes; and home building materials to construct, repair or remodel homes also have the potential of writing off the sales tax on those items.

And that's why car makers, boat builders, airplane manufacturers and home improvement stores might see an uptick in business during the last two weeks of the year.